Investec GSF Global Energy Fund (the "Fund") is a sector equity mutual fund. The Fund aims to achieve capital growth by investing in the equity instruments of internationally quoted companies throughout the world involved in the exploration, production or distribution of oil, gas and other energy sources.
Key risks of the product:
- Energy sector risk - The Fund invests in a small number of sectors (i.e. energy) which may subject it to greater volatility than a more broadly diversified portfolio. The sectors may decline even while broader based equity market indices are rising. The Fund offers exposure to commodities and may include additional risks e.g. political risk, natural events or terrorism. This may influence the production and trading of commodities and the value of financial instruments offering exposure to such commodities.
- Smaller company risk - The Fund may invest in smaller company shares (for example, those in the energy sector) which may be less liquid and more volatile than the shares of larger companies, due to the smaller number of shares in issue and the frequently less diversified and less established nature of the business. These factors can create a greater potential for significant capital losses.
- Derivatives Usage Risk - The Fund may use derivatives for the purposes of hedging and/or efficient portfolio management ("EPM"). In adverse situations, the Fund's use of derivatives may become ineffective in hedging and/or in EPM and the Fund may suffer significant losses.
In the worst case scenario, the value of the Fund may be worth substantially less than the original amount you invested and in an extreme case could be worth nothing.
Investors should not only base on this material alone to make investment decisions. Please refer to the Fund Prospectus for the details of all risk factors.
Factors favouring the energy sector:
- Demand from developing countries is very strong and this is driven primarily by strong Chinese consumption. Round of demand from developed countries is clearly coming through as well.
- Supply growth may lag behind demand recovery as a result of the reduction in investment in new projects in the past two years.
- Supported by positive factors such as attractive energy stocks valuation, with strong real assets backing and steady cashflows.
- The Fund does not track any indices. A bottom-up approach in stock selection is adopted after analysing different types of energy's supply and demand balance and price trend.
- Portfolio is concentrated on 30 to 40 best ideas with high quality and liquidity.
- The Fund seeks stocks with the following characteristics:
1. Undervalued versus history and peers.
2. Strong dividend yields, balance sheets and free cashflow generation.
3. Strong asset backing.